Outgoing Greek Prime Minister George Papandreou waves to the media as he leaves

The new Greek Prime Minister Lucas Papademos is seen outside the presidential palace

ATHENS, Greece (AP) — Europe's financial crisis eased Thursday as Greece installed a respected economist to replace its prime minister and Italy appeared poised to do the same — both hoping that monetary experts can do better than the politicians who drove their nations so deeply into debt.

The announcement in Athens — coupled with the prospect that volatile Italian Prime Minister Silvio Berlusconi will be ushered out soon — quieted market fears, at least for now, that turmoil in Europe could threaten the global economy.

But significant challenges remain in both debt-heavy Mediterranean countries.

Greece's new prime minister, Lucas Papademos, a former vice president of the European Central Bank, must quickly secure the crucial loan installment without which his country will go bankrupt before Christmas, and approve the EU's $177 billion (€130 billion) bailout deal.

In Italy, lawmakers have to pass new austerity measures over the next few days. However, expectations that respected economist Mario Monti will lead an interim technocratic government after Berlusconi goes helped lift the gloom.

Italy's borrowing costs shot up alarmingly Wednesday to 7.4 percent on fears that Berlusconi would linger in office. But the markets calmed Thursday when it appeared that Italian lawmakers would approve the latest government austerity plans in the next few days and Berlusconi would resign after that.

Monti, 68, now heads Milan's Bocconi University, but he made his reputation as the European Union competition commissioner who blocked General Electric's takeover of Honeywell.

European stock markets rose on the twin Greek and Italian developments, while in the U.S. the Dow Jones industrial average was up 113 points, or 1 percent, a day after shedding nearly 400 points. The euro was also in demand, trading 0.5 percent higher at $1.3609.

Still, the European Union warned that the 17-nation eurozone could slip back into "a deep and prolonged" recession next year amid the debt crisis. The European Commission predicted the eurozone will grow a pallid 0.5 percent in 2012 — much less than its earlier forecast of 1.8 percent. EU unemployment was forecast to be stuck at 9.5 percent.

Europe has already bailed out Greece, Portugal and Ireland — but together they make up only about 6 percent of the eurozone's economic output, in contrast to Italy's 17 percent. Italy, the eurozone's third-largest economy, is considered too big for Europe to bail out. It has a mountain of debt — $2.6 trillion (€1.9 trillion) — and a substantial portion of that needs to be refinanced in the next few years.

In Greece, Papademos called for unity and promised to seek cross-party cooperation to keep Greece firmly in the 17-nation eurozone.

"The participation of our country in the eurozone is a guarantee for the country's monetary stability. It is a driver of financial prosperity," Papademos said after getting the mandate to form a Cabinet. "I am not a politician, but I have dedicated most of my professional life to exercising financial policy both in Greece and in Europe."

The 64-year-old Papademos, who also served as Bank of Greece governor, will lead a government backed by both Greece's governing Socialists and the opposition conservatives until early elections, tentatively set for February. He replaces outgoing Prime Minister George Papandreou midway through his four-year term, ending a family dynasty that has dominated Greek politics for decades.

In Washington, State Department spokesman Mark Toner welcomed Papademos' appointment and "the consensus that's been reached in Greece over the need to implement the country's reform commitments to the IMF as well as the European Union."

The new Greek Cabinet will be sworn in Friday. There has been no announcement on its composition, and officials said negotiations continued late Thursday.

However, two government officials and two opposition lawmakers, who spoke on condition of anonymity because they were not authorized to discuss the issue, said Evangelos Venizelos was expected to remain finance minister. Venizelos was deeply involved in negotiating the European rescue plan.

Greek analyst Platon Monokroussos said hopes have been raised that the new prime minister will help the country regain its lost international credibility.

"Of course, the new government will fight an uphill battle to implement a very austere adjustment program in Greece, very significant structural reforms, and this creates a lot of challenges," said Monokroussos, who heads financial market research at Eurobank. "But overall, today's outcome is positive."

European officials greeted the Greek news with relief.

"The agreement to form a government of national unity opens a new chapter for Greece," said a joint statement by European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.

They stressed that "it is important for Greece's new government to send a strong cross-party message of reassurance to its European partners that it is committed to doing what it takes to set its debt on a steady downward path."

The interim government's mandate includes passing the $177 billion (€130 billion) European debt deal that took months to work out, and ensuring the country receives the next $11 billion (€8 billion) installment of its initial €110 billion bailout.

Under the new deal, private bondholders will forgive 50 percent — or some €100 billion — of their Greek debt holdings.

Eurozone officials are withholding the next loan installment until Athens formally approves the rescue package. They have also demanded a written pledge from Papademos, Papandreou, opposition party leader Antonis Samaras, the head of Greece's central bank and the finance minister.

Many Greeks are angry after 20 months of government austerity measures, including repeated salary and pension cuts and tax hikes to meet the conditions of the country's first bailout. Despite the belt-tightening, the Socialist government repeatedly missed its financial targets as Greece fell into a deep recession, amid rapidly rising unemployment that surged to 18.4 percent in August — close to double the EU average.

Papademos' appointment followed 10 days of political turmoil triggered by Papandreou's shock announcement that he wanted to put the latest European bailout deal to a referendum. Fears that the agreement would be defeated led to mayhem on international markets and angered both European leaders and his own Socialist lawmakers.

Bowing to pressure, Papandreou agreed to resign and reached a historic power-sharing deal with Samaras on Sunday to form a transitional government.

Papademos, who is not a member of any party, has been operating lately as an adviser to the prime minister.

He taught at Columbia University and worked at the Federal Reserve Bank of Boston before returning to Greece, where he headed the central bank from 1994 to 2002 after helping fend off a speculative attack on the drachma, Greece's pre-euro currency.

At the Bank of Greece's helm, Papademos presided over an era of increasing independence from the government that was crucial in helping Greece secure membership in the eurozone. He then spent eight years at the European Central Bank.

ONE TRILLION.by Dr. Mahathir bin Mohamad on Saturday, August 6, 2011 at 5:43am.1. Obama, according to their own news reports, is trying to raise the ceiling for borrowing by the US Government.

2. The US Government is in debt to the tune of US$14 trillion. He wants to borrow more in order to repay the loans. If he cannot repay he will be in default. When a country fails to repay loans, it will be declared bankrupt just like anyone else.

3. What is one trillion dollars? We write it down as one billion with three additional zeros after it. Thus 1,000,000,000,000. It is not such a big figure. You add three zeros or three nothings and the figure increases by 1,000 times. But if we write down one billion as 1,000,000,000 one thousand times, we will have a better idea of what one trillion means. We would be horrified at the size of one trillion if we write the figure 1, one trillion times, which really is what one trillion means.

4. We now talk about these huge sums of money without really appreciating the real amount. Even in Malaysia we talk of billionaires now, not millionaires who are dime a dozen. We are losing our sense of proportion.

5. Just consider $14 trillion in Rupiahs or even in Yen. The figure would spill over the edge of a million sheets of A4-sized paper.

6. Malaysia is one of the countries which lent money to the US. When we buy US bonds we are in fact lending money to the US. Now the US dollar has depreciated from 3.8 Ringgit to one US Dollar to 3 Ringgit per US Dollar. We have lost 80 Malaysian sen for each dollar we lent to the US, if we redeem our bonds. Incidentally we will not be allowed to redeem all our bonds as the US has no money.

7. However, if we keep gold we would be rolling in wealth. Gold was fixed at US$35 per ounce by Bretton Woods in 1943. Now it is US$1,400 per ounce. Even at the depreciated US Dollar of 3 Ringgit we would have 4,200 Ringgit worth of gold for every ounce. Even if we had bought gold say 10 years ago we would have made a pile.

8. A US report says that the US war in Iraq, Afghanistan and Pakistan has cost the US more than US$3 trillion. This is being financed by the loans given by other countries through buying US bonds.

9. The US shows no signs of cutting back on military expenditure. Billions of Dollars are spent on researching, developing and producing more efficient means of killing people. Some 60 military bases are maintained all over the world.

10. By all accounts the US is a debtor nation which will never be able to settle its US$14 trillion debt. In other words the US is a poor debtor country, unable to discharge its loans. And it will remain a poor debtor country unless it is willing to cut back massively on its expenditure, particularly its military budget. When one is poor one lives like a poor men.

11. I remember reciting Humpty Dumpty when I was a child. That is the US today. And not all the Nobel laureates in finance, economics and accounting can put it back together once it falls.

12. Far better to admit you are poor and behave like a poor man than to wear flashy suits and throw your weight around. People will soon learn what you really are.